The events of 2020 changed the world permanently, and the payments industry is no exception. The pandemic served as a digital accelerator for how consumers prefer to pay and be paid, and, as a result, payments platforms are more crucial than ever before.
To learn more about the biggest changes businesses are facing in regards to payments and the role of payments platforms, PaymentsJournal sat down with Sean Healey, Chief Product Officer at North Lane and Raymond Pucci, Director of Merchant Services at Mercator Advisory Group.
Payments Platforms are the Key to Success in the New World
PaymentsJournal Payments Platforms are the Key to Success in the New World
The Pandemic Has Been a Digital Accelerator…
Simply defined, payments platforms are the platforms that connect businesses to their customers and employees and make transactions possible. Consequently, they have long been a crucial aspect for any business to maintain day-to-day operations.
In 2020, they became even more important. Payments platforms vary in the functionality and features they offer, but one thing rings true: flexibility and scalability are necessities. This is particularly true in the wake of the COVID-19 pandemic, which accelerated the shift toward digital payments and e-commerce shopping experiences that has been emerging for some time.
In fact, McKinsey & Company found that the pandemic has accelerated the digitization of customer interactions by three years. In July of 2020, 65% of customer interactions in North America were digital, compared to 41% in December 2019. This leap means big changes across many areas of business, especially payments.
“It’s just been an acceleration of trends that we were seeing coming, but certainly e-commerce channels and the [payment] platforms that need to go along with [them are] so essential for businesses to be able to conduct a business,” explained Pucci. “That’s what consumers are really looking for: the ease of ordering, paying, and so on.”
More businesses will rely on digital platforms to deliver payments to their workers, contractors, sales representatives, and other stakeholders. They need a scalable payment solution that enables them easily to make changes and right-size payment programs. “There’s definitely… a clear need identified for the flexibility and scalability around payments specifically,” said Healey.
… Payments Platforms Help Businesses Keep Pace
Businesses that understand and meet the need for flexibility and scalability are well-prepared to succeed in the new world. Payments platforms are the tools that allow them to do so.
Healey used the example of customer engagement at his barber shop as an example of how payments platforms enable businesses to have continued success. While the barber shop used to rely on customers showing up, waiting for an opening, and paying in cash, it now offers scheduling and paying in advance. This makes sense during the pandemic, as it is no longer safe for customers to be mingling inside while waiting for their turn.
“The integration that happened there in a short period of time for a small business is really interesting to me, and that they’ve had to change their business model in many cases,” said Healey.
While on the consumer end, it was simply a matter of adjusting to the new appointment model, small businesses have the heavier lift of integrating with an online platform. That said, the benefits of doing so are worth it. “Integrating with a payments platform, whether it’s now or something that’s already done, will typically give that business a centralized place to manage payment activity. This allows businesses to really create more connected and seamless experiences,” he added.
Payments Platforms Provide the Foundation from Which to Innovate
Just as cloud computing platforms have changed the face of business technology, by freeing up companies to scale without having to manage on premises data centers, a payments platform gives businesses a foundation from which to innovate.
With a payments platform in place, organizations no longer have to worry about building payment solutions from the ground up. Rather, they can focus on using payments strategically. For example, they can devise creative employee or consumer incentives programs and not have to worry about the underlying technology. That’s similar to how tech innovators use existing services and solutions in the cloud to provide innovative customer service.
Rebate programs are a great example of the type of innovation payments platforms can provide. “A platform allows for that scalability, and ultimately efficiency, [over] some dated methods of sending rebates by physical mail,” noted Healey. Taking it one step further, he added, “the businesses are also able to gain insights from that consumer data and better understand their habits [and] their preferences.”
Innovation Translates into Better Customer Experiences
Expanding upon the rebate program example, a telecommunications company may run a rebate program encouraging customers to switch from another provider. The company running the program can then track consumers’ rebate spend to see if the promotional program is successfully driving desirable behaviors, then use the data insights to take actionable steps to improve the customer experience even more.
“Consumers love personalized marketing offers with data analytics capabilities,” said Pucci. “The customer intelligence value, and the ability for merchants to really understand what’s going on with their customers—or in many cases, even the customers of their competitors—they’re able to put something on the virtual table to… get consumers to notice them and to bring more business.”
Real-time capability matters too. North Lane’s recent consumer incentives survey found that 79% of consumers would choose a virtual rebate because it is available immediately. Real-time payments are becoming an expectation for customers, and it’s important to meet customers where they are. A payments platform takes the hassle out of delivering on consumer demand for faster payments.
“What a payments platform can provide, I think is really a win-win for both the business and the consumer,” said Healey.
Agility Translates into Better Worker Experiences
“Agility is inherent in a payments platform,” explained Healey. “[Payment platforms] are especially important in industries where flexibility is key, so enabling those businesses to scale both up and down and shift as people’s preferences change… is really, really important.”
Real life examples of this need for flexibility can be found in companies that are struggling to manage staff changes, payroll, and contracted or freelancing employees. In any of these cases, it is important to have agility with a payments platform as a way to retain workers, attract new workers, and keep remote employee engagement high. Payments platforms can streamline those processes in a way that is beneficial to both the businesses and their employees.
Even after the pandemic ends, the preferences that it triggered for the engagement, convenience, and flexibility of digital payments and a central payments platform will remain. Payments platforms offer the agility to respond to these new preferences while minimizing disruption to essential processes and keeping the investment manageable.
“In most cases, payments [are] not the number one priority, but [they do] make the world go round, so I think that having the platform-first mindset is a big driver for success in the coming years,” concluded Healey.